Saturday, April 24, 2010

Broadband and Growth

The World Bank has found that in low- and middle-income countries every 10 percentage point increase in broadband penetration accelerates economic growth by 1.38 percentage points—more than in high-income countries and more than for other telecommunications services (Figure 1).16 In a similar study, McKinsey & Company estimates that ―a 10 percent increase in broadband household penetration delivers a boost to a country‘s GDP that ranges from 0.1 percent to 1.4 percent. Booz & Company found that ―10 percent higher broadband penetration in a specific year is correlated to 1.5 percent greater labor productivity growth over the following five years.Booz also suggests that ―countries in the top tier of broadband penetration have exhibited 2 percent higher GDP growth than countries in the bottom tier. These studies are the latest in the already extensive work estimating broadband‘s economic impact.

Developing other elements of the broadband ecosystem also provides economic benefits. For example, the growth of Internet-related services and applications has created jobs and led to the creation of new businesses. For example, in November 2009 Google had a market capitalization of $168 billion and employed 19,000 people in 20 countries. China‘s leading Internet search engine, Baidu.com, has a market capitalization of more than $14 billion and over 6,000 employees, and in 2008 had revenues of $460 million.

Developers have also been extremely active in creating applications for various handsets. Annual sales of applications for Apple‘s iPhone exceed $2.4 billion, as well as stimulating additional hardware sales. Thus broadband creates significant economic opportunities for users, service providers, application developers, and network operators alike. McKinsey estimates that ―bringing broadband penetration levels in emerging markets to today‘s Western European levels could potentially add US$300–420 billion in GDP and generate 10–14 million jobs.